failure understand it€¦ · actuality, a culture that makes it safe to admit and ... down the...

Failure Understand It

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We are programmed at an early age to think that failure is bad. That belief prevents organizations from eff ectively learning from their missteps. by Amy C. Edmondson

Amy C. Edmondson is the Novartis Professor of Leadership and Management and co-head of the Technology and Operations Management unit at Harvard Business School.

THE WISDOM OF LEARNING from failure is incontrovertible. Yet orga-nizations that do it well are extraordinarily rare. This gap is not due to a lack of commitment to learning. Managers in the vast majority of enterprises that I have studied over the past 20 years—pharma-ceutical, fi nancial services, product design, telecommunications, and construction companies; hospitals; and NASA’s space shuttle program, among others—genuinely wanted to help their organiza-tions learn from failures to improve future performance. In some cases they and their teams had devoted many hours to after-action reviews, postmortems, and the like. But time after time I saw that these painstaking eff orts led to no real change. The reason: Those managers were thinking about failure the wrong way.

Most executives I’ve talked to believe that failure is bad (of course!). They also believe that learning from it is pretty straight-forward: Ask people to refl ect on what they did wrong and exhort them to avoid similar mistakes in the future—or, better yet, assign a team to review and write a report on what happened and then distribute it throughout the organization.

These widely held beliefs are misguided. First, failure is not al-ways bad. In organizational life it is sometimes bad, sometimes in-evitable, and sometimes even good. Second, learning from organi-zational failures is anything but straightforward. The attitudes and activities required to eff ectively detect and analyze failures are in short supply in most companies, and the need for context-specifi c learning strategies is underappreciated. Organizations need new and better ways to go beyond lessons that are superfi cial (“Proce-dures weren’t followed”) or self-serving (“The market just wasn’t ready for our great new product”). That means jettisoning old

April 2011 Harvard Business Review 49

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cultural beliefs and stereotypical notions of success and embracing failure’s lessons. Leaders can begin by understanding how the blame game gets in the way.

The Blame GameFailure and fault are virtually inseparable in most households, organizations, and cultures. Every child learns at some point that admitting failure means taking the blame. That is why so few organizations have shifted to a culture of psychological safety in which the rewards of learning from failure can be fully realized.

Executives I’ve interviewed in organizations as diff erent as hospitals and investment banks admit to being torn: How can they respond constructively to failures without giving rise to an anything-goes attitude? If people aren’t blamed for failures, what will ensure that they try as hard as possible to do their best work?

This concern is based on a false dichotomy. In actuality, a culture that makes it safe to admit and report on failure can—and in some organizational contexts must—coexist with high standards for per-formance. To understand why, look at the exhibit “A Spectrum of Reasons for Failure,” which lists causes ranging from deliberate deviation to thoughtful experimentation.

Which of these causes involve blameworthy ac-tions? Deliberate deviance, first on the list, obvi-ously warrants blame. But inattention might not. If it results from a lack of effort, perhaps it’s blame-worthy. But if it results from fatigue near the end of an overly long shift, the manager who assigned the shift is more at fault than the employee. As we go down the list, it gets more and more diffi cult to fi nd blame worthy acts. In fact, a failure resulting from thoughtful experimentation that generates valuable information may actually be praiseworthy.

When I ask executives to consider this spectrum and then to estimate how many of the failures in their organizations are truly blameworthy, their an-swers are usually in single digits—perhaps 2% to 5%. But when I ask how many are treated as blamewor-thy, they say (after a pause or a laugh) 70% to 90%. The unfortunate consequence is that many failures go unreported and their lessons are lost.

Not All Failures Are Created EqualA sophisticated understanding of failure’s causes and contexts will help to avoid the blame game and institute an eff ective strategy for learning from

failure. Although an infi nite number of things can go wrong in organizations, mistakes fall into three broad categories: preventable, complexity-related, and intelligent.

Preventable failures in predictable opera-tions. Most failures in this category can indeed be considered “bad.” They usually involve deviations from spec in the closely defined processes of high-volume or routine operations in manufacturing and services. With proper training and support, employ-ees can follow those processes consistently. When they don’t, deviance, inattention, or lack of ability is usually the reason. But in such cases, the causes can be readily identifi ed and solutions developed. Check-lists (as in the Harvard surgeon Atul Gawande’s recent best seller The Checklist Manifesto) are one solution. Another is the vaunted Toyota Production System, which builds continual learning from tiny failures (small process deviations) into its approach to im-provement. As most students of operations know well, a team member on a Toyota assembly line who spots a problem or even a potential problem is encouraged to pull a rope called the andon cord, which immediately initiates a diagnostic and problem-solving process. Production continues unimpeded if the problem can be remedied in less than a minute. Otherwise, produc-tion is halted—despite the loss of revenue entailed—until the failure is understood and resolved.

Unavoidable failures in complex systems. A large number of organizational failures are due to the inherent uncertainty of work: A particular com-bination of needs, people, and problems may have never occurred before. Triaging patients in a hospital emergency room, responding to enemy actions on the battlefi eld, and running a fast-growing start-up all occur in unpredictable situations. And in complex organizations like aircraft carriers and nuclear power plants, system failure is a perpetual risk.

Although serious failures can be averted by fol-lowing best practices for safety and risk management, including a thorough analysis of any such events that do occur, small process failures are inevitable. To consider them bad is not just a misunderstanding of how complex systems work; it is counterproductive. Avoiding consequential failures means rapidly iden-tifying and correcting small failures. Most accidents in hospitals result from a series of small failures that went unnoticed and unfortunately lined up in just the wrong way.

Intelligent failures at the frontier. Failures in this category can rightly be considered “good,” be-

DEVIANCEAn individual chooses to violate a prescribed process or practice.

INATTENTIONAn individual inadver-tently deviates from specifi cations.

LACK OF ABILITYAn individual doesn’t have the skills, conditions, or training to execute a job.

PROCESS INADEQUACYA competent individual adheres to a prescribed but faulty or incomplete process.

TASK CHALLENGEAn individual faces a task too diffi cult to be executed reliably every time.

PROCESS COMPLEXITYA process composed of many elements breaks down when it encounters novel interactions.

UNCERTAINTYA lack of clarity about future events causes people to take seem-ingly reasonable actions that produce undesired results.

HYPOTHESIS TESTINGAn experiment conducted to prove that an idea or a design will succeed fails.

EXPLORATORY TESTINGAn experiment conducted to expand knowledge and investigate a possibility leads to an undesired result.

A Spectrum of Reasons for Failure

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UNDERSTANDING FAILURE STRATEGIES FOR LEARNING FROM FAILURE


cause they provide valuable new knowledge that can help an organization leap ahead of the competition and ensure its future growth—which is why the Duke University professor of management Sim Sitkin calls them intelligent failures. They occur when experi-mentation is necessary: when answers are not know-able in advance because this exact situation hasn’t been encountered before and perhaps never will be again. Discovering new drugs, creating a radically new business, designing an innovative product, and testing customer reactions in a brand-new market are tasks that require intelligent failures. “Trial and error” is a common term for the kind of experimen-tation needed in these settings, but it is a misnomer, because “error” implies that there was a “right” out-come in the fi rst place. At the frontier, the right kind of experimentation produces good failures quickly. Managers who practice it can avoid the unintelligentfailure of conducting experiments at a larger scale than necessary.

Leaders of the product design fi rm IDEO under-stood this when they launched a new innovation-strategy service. Rather than help clients design new products within their existing lines—a process IDEO had all but perfected—the service would help them create new lines that would take them in novel strategic directions. Knowing that it hadn’t yet fi g-ured out how to deliver the service eff ectively, the company started a small project with a mattress company and didn’t publicly announce the launch of a new business.

Although the project failed—the client did not change its product strategy—IDEO learned from it and fi gured out what had to be done diff erently. For instance, it hired team members with MBAs who could better help clients create new businesses and made some of the clients’ managers part of the team. Today strategic innovation services account for more than a third of IDEO’s revenues.

Tolerating unavoidable process failures in com-plex systems and intelligent failures at the frontiers of knowledge won’t promote mediocrity. Indeed, tol-erance is essential for any organization that wishes to extract the knowledge such failures provide. But failure is still inherently emotionally charged; get-ting an organization to accept it takes leadership.

Building a Learning Culture Only leaders can create and reinforce a culture that counteracts the blame game and makes people feel both comfortable with and responsible for surfacing and learning from failures. (See the sidebar “How Leaders Can Build a Psychologically Safe Environ-ment.”) They should insist that their organizations develop a clear understanding of what happened—not of “who did it”—when things go wrong. This requires consistently reporting failures, small and large; systematically analyzing them; and proac-tively searching for opportunities to experiment.

Idea in BriefThe ingrained attitude that all failures are bad means organizations don’t learn from them.

Leaders need to recognize that failures occur on a spectrum from blameworthy to praise-worthy, and that they fall into three categories:

• Failures in routine or pre-dictable operations, which can be prevented

• Those in complex opera-tions, which can’t be avoided but can be managed so that

they don’t mushroom into catastrophes

• Unwanted outcomes in, for example, research settings, which are valuable because they generate knowledge

Although learning from failures requires diff erent strat-egies in diff erent work settings, the goal should be to detect them early, analyze them

deeply, and design experiments or pilot projects to produce them. But if the organization is ultimately to succeed, employ-ees must feel safe admitting to and reporting failures. Creating that environment takes strong leadership.

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Leaders should also send the right message about the nature of the work, such as reminding people in R&D, “We’re in the discovery business, and the faster we fail, the faster we’ll succeed.” I have found that managers often don’t understand or appreciate this subtle but crucial point. They also may approach fail-ure in a way that is inappropriate for the context. For example, statistical process control, which uses data analysis to assess unwarranted variances, is not good for catching and correcting random invisible glitches such as software bugs. Nor does it help in the devel-opment of creative new products. Conversely, though great scientists intuitively adhere to IDEO’s slogan,

“Fail often in order to succeed sooner,” it would hardly promote success in a manufacturing plant.

Often one context or one kind of work dominates the culture of an enterprise and shapes how it treats failure. For instance, automotive companies, with their predictable, high-volume operations, under-standably tend to view failure as something that can and should be prevented. But most organizations engage in all three kinds of work discussed above—routine, complex, and frontier. Leaders must ensure that the right approach to learning from failure is applied in each. All organizations learn from failure through three essential activities: detection, analy-sis, and experimentation.

Detecting Failure Spotting big, painful, expensive failures is easy. But in many organizations any failure that can be hidden is hidden as long as it’s unlikely to cause immediate or obvious harm. The goal should be to surface it early, before it has mushroomed into disaster.

Shortly after arriving from Boeing to take the reins at Ford, in September 2006, Alan Mulally insti-

tuted a new system for detecting failures. He asked managers to color code their reports green for good, yellow for caution, or red for problems—a common management technique. According to a 2009 story in Fortune, at his fi rst few meetings all the managers coded their operations green, to Mulally’s frustration. Reminding them that the company had lost several billion dollars the previous year, he asked straight out, “Isn’t anything not going well?” After one tenta-tive yellow report was made about a serious product defect that would probably delay a launch, Mulally responded to the deathly silence that ensued with applause. After that, the weekly staff meetings were full of color.

That story illustrates a pervasive and fundamen-tal problem: Although many methods of surfacing current and pending failures exist, they are grossly underutilized. Total Quality Management and so-liciting feedback from customers are well-known techniques for bringing to light failures in routine operations. High-reliability-organization (HRO) practices help prevent catastrophic failures in com-plex systems like nuclear power plants through early detection. Electricité de France, which operates 58 nuclear power plants, has been an exemplar in this area: It goes beyond regulatory requirements and re-ligiously tracks each plant for anything even slightly out of the ordinary, immediately investigates what-ever turns up, and informs all its other plants of any anomalies.

Such methods are not more widely employed because all too many messengers—even the most senior executives—remain reluctant to convey bad news to bosses and colleagues. One senior executive I know in a large consumer products company had grave reservations about a takeover that was already

If an organization’s employees are to help spot existing and pending failures and to learn from them, their leaders must make it safe to speak up. Julie Morath, the chief operating offi cer of Children’s Hospital and Clinics of Min-nesota from 1999 to 2009, did just that when she led a highly successful eff ort to reduce medical errors. Here are fi ve practices I’ve identifi ed in my research, with examples of how Morath employed them to build a psychologically safe environment.

How Leaders Can Build a Psychologically Safe Environment

EMBRACE MESSENGERS

FRAME THE WORK ACCURATELY People need a shared understanding of the kinds of failures that can be expected to occur in a given work context (routine production, complex operations, or innovation) and why openness and collaboration are important for surfacing and learning from them. Accurate framing detoxifi es failure.

IN A COMPLEX OPERATION LIKE A HOSPITAL, many consequential failures are the result of a series of small events. To heighten aware-ness of this system complexity, Morath presented data on U.S. medical error rates, organized discussion groups, and built a team of key infl uencers from throughout the organization to help spread knowledge and understanding of the challenge.

Those who come forward with bad news, questions, concerns, or mistakes should be rewarded rather than shot. Celebrate the value of the news fi rst and then fi gure out how to fi x the failure and learn from it.

MORATH IMPLEMENTED “BLAMELESS REPORTING”—an approach that encouraged employees to reveal medical errors and near misses anonymously. Her team created a new patient safety report, which expanded on the previous version by asking employees to describe incidents in their own words and to comment on the possible causes. Soon after the new system was implemented, the rate of reported failures shot up. Morath encouraged her people to view the data as good news, because the hospital could learn from failures—and made sure that teams were assigned to analyze every incident.




they could do contributed to their inability to detect the failure. Postevent analyses suggested that they might indeed have taken fruitful action. But clearly leaders hadn’t established the necessary culture, systems, and procedures.

One challenge is teaching people in an organi-zation when to declare defeat in an experimental course of action. The human tendency to hope for the best and try to avoid failure at all costs gets in the way, and organizational hierarchies exacerbate it. As a result, failing R&D projects are often kept going much longer than is scientifi cally rational or economically prudent. We throw good money after bad, praying that we’ll pull a rabbit out of a hat. In-tuition may tell engineers or scientists that a project has fatal fl aws, but the formal decision to call it a fail-ure may be delayed for months.

Again, the remedy—which does not necessarily involve much time and expense—is to reduce the stigma of failure. Eli Lilly has done this since the early 1990s by holding “failure parties” to honor in-telligent, high-quality scientifi c experiments that fail to achieve the desired results. The parties don’t cost much, and redeploying valuable resources—partic-ularly scientists—to new projects earlier rather than later can save hundreds of thousands of dollars, not to mention kickstart potential new discoveries.

in the works when he joined the management team. But, overly conscious of his newcomer status, he was silent during discussions in which all the other ex-ecutives seemed enthusiastic about the plan. Many months later, when the takeover had clearly failed, the team gathered to review what had happened. Aided by a consultant, each executive considered what he or she might have done to contribute to the failure. The newcomer, openly apologetic about his past silence, explained that others’ enthusiasm had made him unwilling to be “the skunk at the picnic.”

In researching errors and other failures in hos-pitals, I discovered substantial differences across patient-care units in nurses’ willingness to speak up about them. It turned out that the behavior of midlevel managers—how they responded to failures and whether they encouraged open discussion of them, welcomed questions, and displayed humility and curiosity—was the cause. I have seen the same pattern in a wide range of organizations.

A horrifi c case in point, which I studied for more than two years, is the 2003 explosion of the Colum-bia space shuttle, which killed seven astronauts (see

“Facing Ambiguous Threats,” by Michael A. Roberto, Richard M.J. Bohmer, and Amy C. Edmondson, HBR November 2006). NASA managers spent some two weeks downplaying the seriousness of a piece of foam’s having broken off the left side of the shuttle at launch. They rejected engineers’ requests to re-solve the ambiguity (which could have been done by having a satellite photograph the shuttle or ask-ing the astronauts to conduct a space walk to inspect the area in question), and the major failure went largely undetected until its fatal consequences 16 days later. Ironically, a shared but unsubstantiated belief among program managers that there was little

ACKNOWLEDGE LIMITS

INVITE PARTICIPATION

SET BOUNDARIES AND HOLD PEOPLE ACCOUNTABLE

Being open about what you don’t know, mis-takes you’ve made, and what you can’t get done alone will encourage others to do the same.

AS SOON AS SHE JOINED THE HOSPITAL, Morath explained her passion for patient safety and acknowledged that as a newcomer, she had only limited knowledge of how things worked at Children’s. In group presenta-tions and one-on-one discussions, she made clear that she would need everyone’s help to reduce errors.

Ask for observations and ideas and create opportunities for people to detect and analyze failures and promote intelligent experiments. Inviting participation helps defuse resistance and defensiveness.

MORATH SET UP CROSS-DISCIPLINARY TEAMS to analyze failures and personally asked thoughtful questions of employees at all levels. Early on, she invited people to refl ect on their recent experiences in caring for patients: Was everything as safe as they would have wanted it to be? This helped them recognize that the hospital had room for improvement. Suddenly, people were lining up to help.

Paradoxically, people feel psychologically safer when leaders are clear about what acts are blameworthy. And there must be consequences. But if someone is punished or fi red, tell those directly and indirectly aff ected what happened and why it warranted blame.

WHEN SHE INSTITUTED BLAMELESS REPORT-ING, Morath explained to employees that although reporting would not be punished, specifi c behaviors (such as reckless conduct, conscious violation of standards, failing to ask for help when over one’s head) would. If someone makes the same mistake three times and is then laid off , coworkers usually express relief, along with sadness and concern—they understand that patients were at risk and that extra vigilance was required from others to counterbalance the person’s shortcomings.

The slogan “Fail often in order to succeed sooner” would hardly promote success in a manufacturing plant.


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Analyzing Failure Once a failure has been detected, it’s essential to go beyond the obvious and superfi cial reasons for it to understand the root causes. This requires the discipline—better yet, the enthusiasm—to use so-phisticated analysis to ensure that the right lessons are learned and the right remedies are employed. The job of leaders is to see that their organizations don’t just move on after a failure but stop to dig in and discover the wisdom contained in it.

Why is failure analysis often shortchanged? Be-cause examining our failures in depth is emotionally unpleasant and can chip away at our self-esteem. Left to our own devices, most of us will speed through or avoid failure analysis altogether. Another reason is that analyzing organizational failures re-quires inquiry and openness, patience, and a toler-ance for causal ambiguity. Yet managers typically admire and are rewarded for decisiveness, effi ciency, and action—not thoughtful refl ection. That is why the right culture is so important.

The challenge is more than emotional; it’s cogni-tive, too. Even without meaning to, we all favor evi-dence that supports our existing beliefs rather than alternative explanations. We also tend to downplay our responsibility and place undue blame on exter-nal or situational factors when we fail, only to do the reverse when assessing the failures of others—a psychological trap known as fundamental attribu-tion error.

My research has shown that failure analysis is often limited and ineff ective—even in complex or-ganizations like hospitals, where human lives are at stake. Few hospitals systematically analyze medical errors or process fl aws in order to capture failure’s lessons. Recent research in North Carolina hospitals, published in November 2010 in the New England Journal of Medicine, found that despite a dozen years of heightened awareness that medical errors result in thousands of deaths each year, hospitals have not become safer.

Fortunately, there are shining exceptions to this pattern, which continue to provide hope that or-ganizational learning is possible. At Intermountain

Healthcare, a system of 23 hospitals that serves Utah and southeastern Idaho, physicians’ deviations from medical protocols are routinely analyzed for opportunities to improve the protocols. Allowing deviations and sharing the data on whether they ac-tually produce a better outcome encourages physi-cians to buy into this program. (See “Fixing Health Care on the Front Lines,” by Richard M.J. Bohmer, HBR April 2010.)

Motivating people to go beyond first-order rea-sons (procedures weren’t followed) to understanding the second- and third-order reasons can be a major challenge. One way to do this is to use interdisciplin-ary teams with diverse skills and perspectives. Com-plex failures in particular are the result of multiple events that occurred in different departments or disciplines or at diff erent levels of the organization. Understanding what happened and how to prevent it from happening again requires detailed, team-based discussion and analysis.

A team of leading physicists, engineers, aviation experts, naval leaders, and even astronauts devoted months to an analysis of the Columbia disaster. They conclusively established not only the first-order cause—a piece of foam had hit the shuttle’s leading edge during launch—but also second-order causes: A rigid hierarchy and schedule-obsessed culture at NASA made it especially difficult for engineers to speak up about anything but the most rock-solid concerns.

Promoting Experimentation The third critical activity for effective learning is strategically producing failures—in the right places, at the right times—through systematic experi-mentation. Researchers in basic science know that although the experiments they conduct will occa-sionally result in a spectacular success, a large per-centage of them (70% or higher in some fi elds) will fail. How do these people get out of bed in the morn-ing? First, they know that failure is not optional in their work; it’s part of being at the leading edge of scientifi c discovery. Second, far more than most of us, they understand that every failure conveys valu-

QDesigning Successful Failures

Perhaps unsurprisingly, pilot projects are usually designed to succeed rather than to produce intelligent failures—those that gener-ate valuable information. To know if you’ve designed a genuinely useful pilot, consider whether your man-agers can answer yes to the following questions:

Is the pilot being tested under typical circum-stances (rather than optimal conditions)?

Do the employees, customers, and re-sources represent the fi rm’s real operating environment?

Is the goal of the pilot to learn as much as possible (rather than to demonstrate the value of the proposed off ering)?

Is the goal of learn-ing well understood by all employees and managers? Is it clear that com-pensation and perfor-mance reviews are not based on a successful outcome for the pilot? Were explicit changes made as a result of the pilot test?

Too often, pilots are conducted under optimal conditions rather than representative ones. Thus they can’t show what won’t work.




able information, and they’re eager to get it before the competition does.

In contrast, managers in charge of piloting a new product or service—a classic example of experimen-tation in business—typically do whatever they can to make sure that the pilot is perfect right out of the starting gate. Ironically, this hunger to succeed can later inhibit the success of the offi cial launch. Too often, managers in charge of pilots design optimal conditions rather than representative ones. Thus the pilot doesn’t produce knowledge about what won’t work.

In the very early days of DSL, a major telecom-munications company I’ll call Telco did a full-scale launch of that high-speed technology to consumer households in a major urban market. It was an un-mitigated customer-service disaster. The company missed 75% of its commitments and found itself confronted with a staggering 12,000 late orders. Cus-tomers were frustrated and upset, and service reps couldn’t even begin to answer all their calls. Em-ployee morale suff ered. How could this happen to a leading company with high satisfaction ratings and a brand that had long stood for excellence?

A small and extremely successful suburban pi-lot had lulled Telco executives into a misguided confidence. The problem was that the pilot did not resemble real service conditions: It was staff ed with unusually personable, expert service reps and took place in a community of educated, tech-savvy customers. But DSL was a brand-new technology and, unlike traditional telephony, had to interface with customers’ highly variable home computers and technical skills. This added complexity and unpredictability to the service-delivery challenge in ways that Telco had not fully appreciated before the launch.

A more useful pilot at Telco would have tested the technology with limited support, unsophisti-cated customers, and old computers. It would have been designed to discover everything that could go wrong—instead of proving that under the best of conditions everything would go right. (See the side-bar “Designing Successful Failures.”) Of course, the managers in charge would have to have understood that they were going to be rewarded not for suc-cess but, rather, for producing intelligent failures as quickly as possible.

In short, exceptional organizations are those that go beyond detecting and analyzing failures and try to generate intelligent ones for the express purpose

of learning and innovating. It’s not that managers in these organizations enjoy failure. But they rec-ognize it as a necessary by-product of experimen-tation. They also realize that they don’t have to do dramatic experiments with large budgets. Often a small pilot, a dry run of a new technique, or a simu-lation will suffi ce.

THE COURAGE to confront our own and others’ imper-fections is crucial to solving the apparent contradic-tion of wanting neither to discourage the reporting of problems nor to create an environment in which anything goes. This means that managers must ask employees to be brave and speak up—and must not respond by expressing anger or strong disapproval of what may at fi rst appear to be incompetence. More often than we realize, complex systems are at work behind organizational failures, and their lessons and improvement opportunities are lost when conversa-tion is stifl ed.

Savvy managers understand the risks of unbri-dled toughness. They know that their ability to fi nd out about and help resolve problems depends on their ability to learn about them. But most manag-ers I’ve encountered in my research, teaching, and consulting work are far more sensitive to a diff erent risk—that an understanding response to failures will simply create a lax work environment in which mis-takes multiply.

This common worry should be replaced by a new paradigm—one that recognizes the inevitability of failure in today’s complex work organizations. Those that catch, correct, and learn from failure before oth-ers do will succeed. Those that wallow in the blame game will not.

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ALL THINGS MUST ENDIn 2006 the world’s oldest company—Kongō Gumi, a family-owned Japanese temple builder—closed down. It had been in business for 1,400 years.

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